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Gain New Insight into Corporate Behavior Affecting the UN SDGs: Moving Beyond Revenue-Based Approaches

ESG

By Eli Reisman  |  December 28, 2020

When the United Nations (UN) created the Sustainable Development Goals (SDGs) to replace the Millennium Development Goals in 2015, the UN unveiled a new framework that focused on large-scale issues that affect us all. The audacity of the goals was massive, as was the challenge to build an ecosystem around the SDGs that would allow companies, governments, and institutions to be held accountable to the goals.

Early on, it became clear that a key component to this ecosystem would be SDG datasets that would enable the investment community to align investment practices with companies that were helping to achieve the SDGs. As with all new voluntary frameworks, the ramp-up of company disclosure can take years, making it difficult to provide quality data to the market. According to a PwC study that reviewed 1,000 corporate sustainability reports, 72% of companies mentioned the SDGs while only 14% of companies mentioned specific targets. That illustrates that the interest in the SDGs is strong, but we are a long way off from universal reporting.  

In response to the lack of data, many ESG data providers took a revenue-mapping-based approach to provide SDG datasets. While this approach provides insights into how companies are performing on the SDGs, it does not capture a holistic view of how companies are performing across all of the SDGs.

Let’s take Tesla, for example. Everyone understands that Tesla is changing the car market as the world’s largest producer of electric cars. Additionally, Tesla’s purchase of SolarCity made Tesla one of the largest solar panel producers in the U.S. and a major player in on-site battery storage of solar energy. All of these activities will show up in Tesla’s revenue statement and can be mapped directly back to the Sustainable Development Goal 7: Affordable and Clean Energy.

However, the following events that are critical to understanding Tesla’s overall impact on the SDGs, would not show up in Tesla’s revenue statement and would be missed by simple revenue mapping:

  • Goal 8: Decent Work & Economic Growth
    • 2020-05-14 – “Elon Musk defies coronavirus orders, opens his California Tesla factory” – the Fresno Bee
  • Goal 12: Responsible Consumption & Production
    • 2020-02-20 – “Tesla said to be in talks to use CATL’s cobalt-free batteries in China-made cars” – StarCarSiFu
  • Goal 15: Life on Land
    • 2020-02-17 – “Tesla resumes tree cutting in Germany to build Gigafactory” – Reuters

To fill this significant data gap, Truvalue Labs, a FactSet company, has employed its unique and powerful technology-based approach to uncovering ESG signals in unstructured content in order to build an SDG-focused product that specifically identifies, surfaces, and scores data that is relevant to the SDG goals.

Some ESG data providers rely heavily on corporate disclosures to build SDG scores, whereas Truvalue Labs does not. Instead, because Truvalue Labs sources data from over 100,000 vetted sources (local and international news, NGOs, watchdog groups, and government organizations), the company can provide a constant stream of SDG scores based on events that capture broader aspects of how companies are performing on SDGs, providing a more complete picture than a revenue-based approach alone would.

In addition to capturing SDG company performance on a wider range of SDG issues, Truvalue Labs’ approach also provides users the materiality focus that the investment community has come to expect from ESG data. Through Truvalue Labs’ Dynamic Materiality™ scores, the SDG data set can identify which specific SDG goals are truly material and deserve additional focus on a company, industry, or sector basis.

Truvalue Labs’ SDG API offerings provide a robust dataset that helps move the market beyond the limitations of a revenue-mapping-based approach into an era where investors can get a better view of corporate behavior across the SDGs.

TruValue Labs’ data is now part of FactSet’s powerful ESG solutions.

This article was previously published by TruValue Labs.

SDG-monitor

Eli Reisman

Director of Product Management at TruValue Labs

Mr. Eli Reisman is the Director of Product Management at Truvalue Labs. In this role, he is responsible for Truvalue Labs’ core product offerings. Prior, he worked as the Director of Partnerships at SASB, where he managed the licensing and integration of SASB’s framework within SABS partner’s products and the development of SASB’s internal products, including the SASB Navigator, the company’s first web-based research library. Mr. Reisman earned a bachelor’s degree in Urban and Environmental Policy from Occidental College and an MBA from George Washington University.

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